Categories: Bankruptcy

Teen Retail Store Claire’s is Facing Bankruptcy

Coming on the heels of Aeropostale, PacSun, and Sports Authority, shopping mall stalwart Claire’s is facing bankruptcy. The chain has been in trouble for some time, burdened with substantial debt following its acquisition by Apollo Global Management and as of the end of 2015 had 2.37 billion in long-term debt. At the moment, the teen oriented retailer is counting on back to school sales to lift it out of a death spiral.


Despite the optimism, debt restructuring talks are underway after the closing of some 150 stores in the past year. Creditors are circling and it appears that bankruptcy is likely whether it is assumed voluntarily or forced by creditors. It may not be possible to restructure the debt load in chapter 11, and a chapter 7 bankruptcy may be in the offing.


The company had previously brought on board members and C level executives with experience in working with distressed companies. However, the leveraged buyout in 2007 was valued at 3.1 billion and saddled the company with huge amounts of debt just as the recession flattened the discretionary income of many families. An ill-timed purchase, too much debt, and a changing retail marketplace may have doomed the venture from its outset. In just the last few years its sales declined from $354 million in 2013 to just $320 million in 2015 – when the economic recovery was well underway. While these numbers would be more than respectable amounts, the stores were unable to service their debt and Claire’s had not diversified into more profitable marketing positions.


Quite simply, online shopping offers teens a wider variety of clothing, generally at better prices – just the same as many adults are now shopping exclusively online for their clothing and shoes, as well as pet supplies, groceries, and other household goods. Failure to diversify and carve out a digital niche has been the doom of many retailers within the past five years. Even fast fashion stores can’t keep up with the speed at which new offerings enter digital spaces such as Facebook, and other social media outlets. The Internet also offers budget conscious consumers – which include teens – the opportunity to research price and even assemble and compare outfits in shopping carts and on social media such as Polyvore.


Malls, once the hub of cool kid social life in the 70s, 80s, 90s, and early 2000’s are going the way of the dinosaurs. Indeed these often half empty, and decaying buildings are being repurposed or torn down entirely. Dead Mall syndrome is becoming more prevalent as specialty stores go bankrupt, big box stores need more room, and small businesses increase their online presence at the expense of square footage in the local shopping center. It remains to be seen if Claire’s can generate enough cool appeal to pull it back from the brink.


While you might not be carrying the same debt load, if you are in debt the picture can seem every bit as dire as Claire’s. We offer free consultations, and help with getting you back on a firm financial footing. Give us a call and let’s see what we can do to get you a good result.

About Chad Van Horn

Chad T. Van Horn, Esq. is a South Florida business leader and founding partner attorney of Van Horn Law Group, P.A. Through a combination of dedicated philanthropy, spirited entrepreneurship and legal expertise, he applies his resources and network to helping people. Learn more about Chad Van Horn

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Chad Van Horn

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